Energy saving scheme delay announced by government

By Mark Venables

Published Thursday, November 25, 2010

The Government has announced it would delay the implementation of a scheme to encourage businesses and organisations to save energy, after controversially changing the programme into what critics described as a "green stealth tax".

In last month's comprehensive spending review the Treasury said it would be keeping revenues raised from the carbon reduction commitment (CRC) scheme, instead of recycling the money back to organisations taking part.

Large public and private sector organisations which use more than a certain amount of energy each year, including hospitals and London Fire Brigade, had to register by September 30 for the scheme, which will force them to buy credits for their emissions.

At the end of each year, the money raised from the sale of credits was due to be returned to participants, with those which had done most to cut their emissions being rewarded with extra cash and those which had done least being penalised.

Today Energy Secretary Chris Huhne said the decision to keep the money from the scheme, which will reach £1 billion a year by 2014/2015, had been a difficult one, made in the context of pressure on public spending, and pledged to listen to organisations taking part in the scheme to make the scheme work better.

The Government has promised to simplify the programme, and Huhne said ministers would be consulting on what needed to be done to improve it.

He told a climate change conference at leading business group the CBI that the Government will delay the implementation of the scheme, so that the first sale of permits to cover energy use will not take place next year, but in 2012.

The sale would be for energy already used, not predictions by companies of how much they might use in the coming year.

And participants will not have to register for the second phase of the scheme - due to start in April 2011 - until 2013.

Huhne told the CBI that the principle of the scheme was sound, but the implementation fell short.

"We share many of your concerns about the CRC. That is why we have made a commitment to simplify it," he told delegates."The decision not to proceed with revenue recycling was a difficult one, taken against a background of unprecedented pressure on the public finances.

"We had to focus on getting the best value for money - and sending a clearer price signal to participants.

"Given a blank slate, we would do things a little differently. But for now, you have my assurance that we will engage with all of our stakeholders to make the scheme work better - for you, and for us."

Richard Lambert, director general of the CBI, said: "The announcement that there will be a consultation and that phase two will be delayed mark the start of winning back those businesses angered by the decision to remove the cash-back incentive.

"However, much more needs to be done. It is critical that the CRC becomes an effective tool for encouraging energy efficiency, and not just another tax."

Lambert told the CBI conference those who feared green taxes would become another stealth tax had their prejudices "amply confirmed" by the way the CRC had been converted without consultation into another revenue source for the Treasury.

And he said the pace of progress in shifting to a low carbon economy in the past few years had been disappointing.

He said the UK's nuclear programme was a year behind where people hoped it would be, consumer behaviour had not shifted, and little progress had been made on building gas storage capacity.

And he warned that inaction on climate change would mean the UK lost out to emerging economies such as China in the race to develop new green products and services.